In what is certainly crucial data for the economy’s direction, US inflation has fallen to 3.4%. Indeed, the CPI report has continued an 11-week trend of data arriving above 3%, with traders not optimistic that the figure will fall below that number any time soon.
The development plays a vital role in the direction of the Federal Reserve. Specifically, the central bank is carefully observing these reports to inform their inaugural interest rate cut for 2024. They have consistently affirmed that those cuts were coming; however, they have not set a timetable for when they could arrive.
Also Read: President Biden Says Inflation Data May Delay Interest Rate Cuts
US Inflation Stays Above 3% for April
Heading into 2024, the US economy had anticipated interest rate cuts at several points. Over the past two years, the Federal Reserve has engaged in an unrelenting tightening campaign. Subsequently, many observed the growing likelihood of that reversing this year.
However, we are entering May, and that has yet to take place. Subsequently, the market is anxiously awaiting when it will arrive, as data has yet to meet the central bank’s target. Now, US inflation has fallen to 3.4%, a critical development that will leave investors and the Fed at a crossroads.
Also Read: US Economy: What Will Happen If the Federal Reserve Doesn’t Cut Rates Soon?
Federal Reserve Chair Jerome Powell discussed his inflation expectations at a recent banking event. Specifically, Powell expected “inflation will move back down… on a monthly basis to levels that were more like the lower readings that we were having last year,” he said according to Reuters.
However, Powell also said his “confidence in that is not as high as it was.” Specifically, the lack of confidence was due to the inflation speed of the year’s initial months. Moreover, he assured that interest rate hikes would be out of the question, while cuts are continuing to be more uncertain with every passing month.